| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : Irish Economy Last Updated: Mar 25, 2014 - 5:39 AM


Irish Medium-Term Economic Strategy 2014-2020: Exports to plunge by €50bn - Part 1
By Michael Hennigan, Finfacts founder and editor
Nov 26, 2013 - 5:32 AM

Email this article
 Printer friendly page
IDA Ireland's iconic advertisement of the 1980s promoting Ireland as a location of skilled and educated workers

Irish Medium-Term Economic Strategy 2014-2020: The Irish Government plans to issue a growth strategy document next month to coincide with the exit from the international bailout and past experience coupled with signals so far, suggest that it will be a promotional brochure for an international audience with some questionable claims and omissions. The expected plunge in services exports by as much as €50bn during the time horizon is not likely to be acknowledged.

There is an urgent need for a credible growth strategy that has an unvarnished assessment of the challenges with an honest analysis of strengths, weaknesses, opportunities and threats, using data that is free of the outsize impact of the foreign-owned exporting sector.

For example citing exports to China without recognising that 95% of the value is from foreign-owned firms such as Intel, is no guide to how difficult the market would be for indigenous firms. While the Department of Finance's claim here [pdf; page 11] that a "continued competitiveness boost through reduction in unit labour costs with a 21% relative improvement forecast against the Eurozone average," is an economy with the truth - - the average whole economy hourly labour cost rose 1% from Jan. 2008 to end-June 2013 and the apparent productivity miracle resulted from headline jumps in output and exports of services at foreign firms that were not real.

In a system addicted to spin where every trade mission has pre-arranged successes and Richard Bruton, enterprise minister, just back from India with whom Irish trade is at a decimal point, was at Microsoft Ireland's headquarters on Monday, lauding the deepening of the "innovation footprint in Ireland with creation of 30 new development roles," it can be a challenge to separate the fantasy from the reality.

The Department of Finance issued an invitation to tender to external consultants last August:

For assistance and analysis in the preparation of a  Medium-Term Economic Strategy (the “Strategy”) to achieve sustainable economic and employment growth over the period 2014-2020, including an analysis of recent medium-term economic strategies in countries/regions comparable to Ireland, and to provide related advice on the effective development and implementation of the Strategy."

Last weekend in an interview with the The Sunday Business Post, Eamon Gilmore, tánaiste/ deputy prime minister, outlined five priorities for the medium-term strategy: (1) A fiscal strategy to cut the budget deficit to 3% of GDP by 2015; (2) measures to boost activity in labour-intensive areas such as the construction sector; (3) a medium-term focus to improve educational standards and boost research and development; (4) improving labour market activation to reduce structural unemployment, and; (5) a review of Ireland’s export strategy with a renewed focus on emerging markets.

Apart from the first point on the need to keep international investors onside, the rest is aspirational.

While the Organisation  for Economic Cooperation and Development's (OECD) latest Economic Survey of Ireland published last September, highlighted the very poor record with activation programmes - - research published by the Economic and Social Research Institute (ESRI) last December showed that in 2010, 22% of households in Ireland were jobless compared with an average of 11% for the EU15 and in Spain and Greece, where the rates of unemployment are the highest in the developed world, the percentage of households without a working adult stood at 10% and 7.5% respectively. The Irish rate in the boom year of 2007 was 15%.  

The OECD recommended empirically-proven policies and sunset clauses in enterprise and innovation supports but there is no experience of this in the Irish system. It said the number of programmes and agencies multiplied during the period of booming growth. "There are now over 170 separate budget lines, sometimes for very small amounts of money, and 11 major funding agencies involved in disbursing the Science Budget, although it is small by international standards."

This is boring to ministers but nobody else is in charge and for example enterprise agency heads say nothing of substance in public and possibly also in private.

Focus limited fiscal resources on policies empirically-proven to improve employability; this will require systematic evaluation of labour-market programmes through consistent tracking and randomised trials, followed by decisions to close down ineffective schemes while strengthening successful ones.

Reflecting significant uncertainties about the effectiveness of various innovation policy tools, independently and regularly evaluate all actions in this area, strengthen programmes with proven higher returns, and wind down the others. To promote effective evaluation, ensure all innovation and enterprise supports have sunset clauses."

Who is driving the strategy?

There is no serious public debate on the growth challenges; ministers and senior public officials have had nothing to say, and it cannot be surprising that a promotional brochure is in prospect.  

It appears that the external consultants are being used to give ballast to the impending report with lots of charts and comparisons from other countries but for example a lot of people know already about the success of the Finnish educational system and the literacy of the adult population. There is however no prospect of significant educational reform in Ireland nor public service reform.

Irish aspirations in respect of the potential of emerging markets so far reflect ignorance of the realities in the key countries and as regards innovation, in 2006, there was a national goal that Ireland should be recognised as a "world-class knowledge economy" by 2013. The failure to achieve the goal was ignored by the policy makers, the vested interests and the mainstream media.

So typically giving precedence to spin and faith over failures since 2006, Science Foundation Ireland (SFI) set an audacious or delusional new target: "in which Ireland in 2020 is the best country in the world for scientific research excellence and impact."

However, unless failures are acknowledged, there is no prospect of durable success.

In an official report published last April on adding 43,000 jobs in the manufacturing sector by 2020, the term 'strengths' appears 49 times; weakness or weaknesses get no mention.     

The issue of exports is tied to international corporate tax avoidance and the large scale diversion from other markets to Ireland of services revenues by companies such as Apple, Google, Microsoft and Facebook. It results in fake output and exports that  is currently valued at over €40bn and within the coming  three years when new international tax rules will be agreed, the level of diversion will likely to have grown to at least €50bn - - about half the value of services exports - - this value could be wiped from exports through simple accounting transactions.

Last February, Michael Noonan, finance minister, at a Bloomberg event in London, attributed the jump in services exports to “the significant price and cost adjustments that have taken place in recent years.”

This was another economy with the truth and international investors maybe surprised when the day of reckoning arrives. More here on fake services exports and taxes.

Finfacts: Irish Medium-Term Economic Strategy 2014-2020: FDI, SMEs, New Normal - Part 2

Irish Medium-Term Economic Strategy 2014-2020: Innovation and entrepreneurs? - - Part 3

Irish Medium-Term Economic Strategy 2014-2020: Exports to Japan and emerging markets -- Part 4

Irish Medium-Term Economic Strategy 2014-2020: Change comes ever so slowly in Ireland -- Part 5

Irish Medium-Term Economic Strategy 2014-2020: Government says expect aspirations not strategy - - Part 6

Irish Medium-Term Economic Strategy 2014-2020: Government publishes brochure not strategy - Part 7

Irish Medium-Term Economic Strategy 2014-2020: Where will 300,000 net new jobs come from? - - Part 8

Some key points:

  • Ruairí Quinn, minister of education, said in Sept 2013 that the belief that the Irish education system was among the best in the world was: "an assertion based on no evidence whatsoever other than something of a feelgood factor that was communicated to us at home by the greater Irish Diaspora who felt, for whatever reason, that it was better than what their children were experiencing in other parts of the world";

  • The Irish Venture Capital Association also said in Sept, that: "The shortage of entrepreneurs has reached crisis levels as evidenced by the findings from The Global Entrepreneurship Monitor."

  • Irish full-time employment in the internationally tradeable goods and services sectors (foreign and indigenous) at the end of 2012 was at about 295,000 compared with 320,000 in 2000. The drop of 25,000 in the 13-year period coincided with a 20% growth of the workforce (including the unemployed);

  • While job numbers fell, headline exports grew at current prices by 71% in the period 2000-2012 and at constant prices by 59%;

  • Forfás, the policy advisory agency, said this year: "Overall, in 2011, foreign-owned firms accounted for 89% of exports in the Manufacturing Category, 95% of exports in the Internationally-Traded Services";

  • Despite Irish SMEs (small &medium size firms) having very low corporate and employer social security taxes, they have a poor exporting record;

  • Two-thirds of private sector workers are in indigenous non-exporting firms while 56% work for indigenous non-exporting SMEs;

  • Irish and SME firms pay low wages and export small volumes;

  • Huge amount of work force work in Hotels and Restaurants, Wholesale and Retail, Business and Professional Services;

  • Less than one third of IDA Ireland supported foreign firms do any meaningful R&D;

  • The US Chamber of Commerce claim: "In the past half decade, US firms have invested more capital in Ireland than in the previous half century," is a fantasy where 'trapped' overseas cash is counted as an inflow;

  • Filings at the Irish Patents Office in 2012 were at a 30-year low; international filings were also weak;

  • The broad rate of unemployment is above 20% and about 80,000 unemployed are not counted as jobless as they participate in various public funded back-to-work schemes  ;

  • About 30 foreign-owned firms are responsible for 60% of total annual headline exports value. They directly employ 55,000 in a workforce of 2.14m;

  • The Central Statistics Office (CSO) estimates that net emigration by Irish nationals in the period May 2009-April 2013 was 95,000.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25

Related Articles
403 Forbidden

Forbidden

Execute access is denied.


© Copyright 2011 by Finfacts.com

Top of Page

Irish Economy
Latest Headlines
Irish Economy: Central Bank raises 2014 forecasts
Irish corporate tax policy like property bubble driven by short-term interests
Irish Economy: Retail sales volume up 4.8% in year to June; Ex-cars at 3.6%
Irish income inequality fell during the economic bust
Irish Economy: Bruton and politics of jobs numbers; How to add 50%
Corporation Tax Reform: Irish Government should reject pleadings of short-termists
Irish Economy: Bruton's claim of 70,000 jobs added in past 18 months is not correct
FDI in Ireland: Grant Thornton publishes promotional brochure not balanced report
Irish Banking Inquiry: Advisory group says begin crash saga 20 years ago
Moody's forecasts Irish growth rates "of at least 3% for the next few years"
Irish National Competitiveness Council fails to separate wheat from the chaff
Irish SME Finance: Oireachtas committee calls for less dependency on traditional banking
Irish Economy: Merchandise exports up 15% in May
Irish industrial production fell in May; up 32.3% in 12 months & 16.4% in period 2010-2014
Irish indigenous tradeable exports at 9% of total headline exports in 2013
Irish consumer prices up 0.4% in 12 months to June 2014
Official Irish services index fell in May; PMI survey level was at highest since 2007
US-Ireland Tax Inversions 600,000+ staff: Kenny, Noonan met with top US corporate lawyers
IDA Ireland: Jobs in Irish FDI exporting sector remain below 2000 level
Bord Gáis Irish Energy Index unchanged in June; Up 33% since December 2009
Irish Budget 2015: Ibec urges personal & business tax breaks; No wage hikes
German Bundestag committee warns Ireland has no plan for long-term growth
Irish Economy 2014: Recovery on track; keep champagne on ice
Forty American firms account for two-thirds of Irish exports
Irish pension managed funds returns were in range 6% to 7% in H1 2014
Irish Economy 2014: GDP up 2.7% in Q1; GNP up 0.5% - personal spending/ investment weak
Irish Economy 2014: Tax revenues €500m ahead of target; Social Protection spend down €20m
Irish Economy 2014: Services surge but Reality Check required
Irish Live Register + activation program total at 475,000 in June - 22% of workforce
Irish manufacturing output rises but not matched by sales value
Irish health spending among highest of developed world; Consultants best paid
Irish wholesale gas prices close to 4 year lows
In 2012 20,200 adults from ex-European Economic Area became Irish citizens
US tax inversions screw-up Ireland's national accounts; Bring few benefits
Irish Economy 2014: Volume of retail sales ex-cars fell in May
Irish SME firms' weighted default rate at 41%; Credit situation like Greece
Enterprise Ireland doesn't know how many active client firms it supports
Irish Economy: Economics institute says ‘Do Nothing’ stance in Budget 2015 insufficient
Sir Anthony O'Reilly's bitter twilight
Irish Jobs & Innovation: What should Ireland do? - Part 5